35 – GenAI’s Legal Challenge | Investors Questioning VC Valuations | Lilly Going Direct to Consumers | Elevance Adds Large Infusion Service

Vic: [00:00:00] All right. Happy new year. Yes. Happy new year. How was your break? It was good. I got escaped to the beach. Uh, I went to the Dominican Republic, which was beautiful and, uh, hung out with the family and hung on the beach, did a little bit of work. What was the weather like? It was nice. I mean, it was probably 75, 80.

Wow. That’s nice. Uh, but then got me in the sixties at night. So it was almost perfect. Really? That’s pretty far South. That’s nice. Yeah.

Marcus: We, we, we were, uh, we were just in the 38 area. Yeah. Yeah. Um, nice to see the beach, but not, not swimming, not, not 75 80s. Uh, so, you know, but it was, it was good. Good time with family.

Um, work during the break as normal. Yeah. And, uh, you turned 29 again, didn’t you? 48. Um, Yeah, I had a really nice birthday with the family and, uh, you know, it was kind of nice, even though I worked, the, the world did sort of slow down a little bit, you know what I mean? The news stories kind of slowed down and, uh, it [00:01:00] was a pretty uneventful holiday this year.

Um, you remember like when we had the, the, the Christmas day bombing in Nashville? Oh, yeah, yeah. You know what I mean? It’s like occasionally like these holidays can be like really whacked. Um, but this one was, you know, nice, just pretty uneventful, chill,

Vic: Yeah, same for me. I did some work, but it was more strategic or longer term work.

Yep. Think kind of thinking or figure out what I’m going to do this year. And I like that. It’s a different kind of work than day to day emails and stuff like that.

Marcus: Yep. But here we are. We’re back. And this is episode thirty five. And we are going to jump into the first stories of the year.

So kicking things off with everything going on in the generative AI space. So I subscribe to a sub stack by a guy named Gary Marcus, I think it’s in Canada, and he is, uh, he’s an expert in all things AI and writes a really interesting sub stack [00:02:00] that’s not just about sort of the technology, but I think also about sort of the business implications and sort of the murky legal landscape of where we’re headed with all these different AIs and.

Uh, it’s fun because he’s, he’s got a skeptical take on a lot of it. And so he was all over this New York times, uh, suit, uh, that rolled out before the end of the year, um, where the New York times basically sued open AI, um, for their models, being able to show how output from GPT four, uh, basically looked exactly like, uh, You know, output from the actual New York Times, um, maybe a word here and there replaced, but largely, uh, copying what, what was found in the New York Times.

And I think, you know, for people don’t know how generative AI works. We don’t know how generative AI works. I’m not

Vic: sure people at OpenAI know how it works.

Marcus: That’s, that’s, that’s the, that’s the thing about it, right? No one can, it’s a predictive machine. That much we can say. [00:03:00] And it is fed a ton of data, and it basically predicts what a response to a query or a prompt should be.

Um, but we don’t actually know how it’s working, and so we learn how it works really by the outputs, interestingly enough. Right? And in this case, it is appearing to us that, uh, it does have the capacity to copy. So, um, Vic, you and I were having a bit of a conversation with this

Vic: and we decided to hold off until they’re live.

Yeah, I don’t know that it’s, I’m not sure I like the word copying. I think it is predicting what the next. token, the next letter is going to be. And so the, I mean, a word like New York, it is predicting that it’s going to be an E following the N and it sort of spits that out. That’s not the same as, as I would like cut, cut onto the clipboard and then paste into another document [00:04:00] the word New York.

I don’t exactly know how it works. I’m not sure anyone knows exactly how it works, but I don’t know that that is. It’s copying. It’s something different than copying, but the result is the same, which is your point. I think

Marcus: I, I, yes, I, I, I think we have to target the result. And the reason for targeting the result is, um, that if we, if we don’t target the result and we allow the semantic inner workings of how this model and this transformer generates its result to you.

become a loophole, then copyright is pretty much dead. Um, because we’re at the very beginning of a vast new era of AI that’s going to be generative in nature. And, you know, I think in, in many cases, as long as it’s got the license, we would be happy. We might even prefer that it copies. Um, I [00:05:00] think we’d be very happy with it to properly copy.

But in the creative realm, Uh, if you take away copyright, at least in companies, at least in countries where copyright is a part of the fabric of the creative economy, if, if you, if you take that away based on the semantics of how it was actually produced, you leave people with no protective model for their creativity.

Going into the future, you know, maybe it worked in the past, but you’re basically saying AI has sort of rendered that that legal framework void is not quite the right word, but like, uh, insufficient to protect your, your

Vic: value. Well, so let’s, let’s maybe start with where I think we can agree. Okay. I think our economy, our country benefits from creating incentives to encourage humans.

To do [00:06:00] creative work, create, we’re showing people that are listening right now, we’re showing a Star Wars image, I think, and then three other, um, images that look very similar from Dali, uh, about, uh, C 3PO. And, at least I want, I think our economy wants to encourage the next person to create a story like Star Wars.

And the way that we do that in the free market is to hold out a carrot of a lot of money if they do that and a lot of people like it. And so, I, I think I, I agree that we should try to protect those incentives so that creative people have the incentive to keep making really cool stuff. How we do that, I’m not exactly sure.

But I think that’s the, that goal needs to be protected.

Marcus: Yeah, I mean, I, I love this example. Gary Marcus goes through a series of [00:07:00] different examples. He starts with the, with the GPT 4 and New York Times example, but then he goes into a series of different, um, DALI, which is, uh, OpenAI’s image generator, uh, tool.

He, he goes into a series of, of DALI examples. And this one that we’re currently looking at, you know, you’re not even using the actual words of the, Um, IP, so you’re not, you’re not using SpongeBob SquarePants, you’re just using animated sponge and somehow it derives from animated sponge, SpongeBob SquarePants, right?

I mean like that, the image that, that we’re looking at right now, that’s, that’s SpongeBob.

Vic: Right, but don’t you think that’s because the only animated sponge in the history of our culture, there’s only one animated sponge? SpongeBob SquarePants And so there is no other set of things to draw on in the training data, and so it [00:08:00] expects that you want this.

Marcus: I think that’s the way that it could process it. I mean, there’s a lot of implications to mapping the two words animated sponge specifically to SpongeBob SquarePants, to me, right? I mean, because I feel like it could say, okay, What does it mean to animate something? What does a sponge look like? And then animate the sponge.

But that’s not what it’s doing. It’s reaching back into its library of images. And it’s fabricating an image that looks like an image that it’s seen. And so, you’re, you’re correct that it’s based on the, the training data. But man, that’s a, that’s a, That’s kind of a problem, right? Because, especially when it comes to image generation, the training data is definitely going to be limited.

And it proves that, like, it’s not what people think it is. Like, people think [00:09:00] it’s actually generating something, but it’s not generating something based on image generation. It’s interpretation of words in a way that we would consider to be new, novel, creative and, and intelligent in the same way humans are like the fact that the rendering looks just like Spongebob Squarepants.

That’s, that’s not the, I don’t think that’s what people think is happening behind the veil of, of Dali. Like, I don’t, I get, I get what you’re saying, but for. Animated sponge to result in a Spongebob, a Spongebob image, um, that falls short of what I would expect to be happening under the hood.

Vic: I, I don’t, not sure this is accurate, but I’m just going to try and you can correct me where it’s wrong if either of us know, but I don’t think Dali understands the meaning of animated sponge.

I think it is taking that prompt input. And then [00:10:00] predicting what the user might want in an image based on lots of other images where the words animated and sponge were associated with an image. I think that’s, that’s my, you know, first grade level understanding of how it works. And so it’s not, I don’t think it’s the same as saying, show me an animated sponge and it realizes that that should be SpongeBob.

And then. Create Spongebob, I think it’s much more, um, pattern recognition, like those words animated sponge have been associated with images very much like these before, and then I think it like pixel by pixel assembles it to match what it thinks the user is looking for, or what it’s predicting the user wants.

Now whether we should, we [00:11:00] should, uh, regulate it. Okay. I think we should regulate.

Marcus: Well, I mean, so let’s just take a step back from from regulating it for a second I want to just talk about the the implications here. So the the first thing is the new york times Proactively not waiting and jumping on a lawsuit This was not the behavior that the new york times had when google first decided they wanted to start crawling the entire internet and that tells me that the new york times as a You Content creator, copyright holder, um, that monetizes its intellectual property through paywalls and subscriptions, has learned from the past to not play nice with big tech, and to be aggressive in the beginning before big tech gets too much of a foothold, and it gets too hard.

Um, so Yeah, it’s more

Vic: like, uh, Pirate of Music

Marcus: in

Vic: the 90s. Yeah, yeah. It’s more like that, where they’re [00:12:00] Proactively going right

Marcus: after this, right? So I think that’s really interesting, and it’s going to be, uh, something we’re going to want to watch because the implications for this entire technology going to be wildly impacted by how this case is.

Goes either direction, it’s gonna, it’s gonna wildly shift sort of the direction of this, this technology of generative, generative AI. Now, let’s just assume that the New York Times wins. Okay, let’s just assume they win. That opens up sort of two new paradigms. One, the paradigm where you have technology companies partnering with rather than, and yes, I’m going to sort of assert something pilfering from content.

Okay. Companies and that has not been really what’s been happening for the last at least 10 15 years on the internet It’s largely been except foreign music except foreign music. It’s largely been [00:13:00] technology companies pilfering from content Companies taking their stuff. So right now if you go search search pretty much any search engine, right?

You’ll get the answer to the question On the search page, because they’re pulling the answer from the web page, and they’ll let you sort of look at it. And yeah, it’s like a little box box, drop down the box, never leave the search result page, read all the information, and then they give you a link to click.

But usually you don’t have time. It’s like, you got your answer, you’re good to go. Right? So, so I think if the New York times wins, it opens up this path for all these content companies to create licensing models that will greatly sustain them, them greatly sustain them and change the disruptive nature of generative AI.

And I think that that is broadly good for all creatives. Like, if you create content that, whether you’re the New York Times [00:14:00] or you’re, you know, Joe Schmo, who makes songs and puts them on Spotify or self publishes books, it puts you in a really strong position. I think the second thing is it solidifies data ownership as part of the generative AI stack, right?

So it’s not just incredible cloud infrastructure. Hello, Microsoft Azure and fantastic data science technology. Hello, Open AI. It also, the third component. Of this triad is the actual underlying training data. It becomes a fundamental part of the Gen AI stack. And I think that’s got a lot of great implications for healthcare, right?

Vic: Yeah, I don’t know about the healthcare side. I was tracking you. Maybe it does for healthcare. Um, I think it’s going to be really hard to like, let’s say the New York Times wins. Yep. I don’t know how to implement that. That’s why I went to the music example. Okay. Because I think there’s going to be lots of open source [00:15:00] tools that are out there.

They’re already out there in the wild going, a lot like music before iTunes and Spotify. Yeah,

Marcus: but they don’t have distribution. New York Times doesn’t need to be worried about them. They don’t have distribution, okay? New York Times can’t, I mean, all they can do is send them cease and desist, that doesn’t matter.

Open AI partnering with Microsoft, that matters. Google matters, like, you know. We gotta stay realistic. We can always talk about some open source group that’s out there, blah blah blah, but like, there’s no distribution there.

Vic: Okay. Well, I think it’ll be, I agree it’ll be interesting. I don’t know where you would draw the line between what I would say is, uh, like, acceptable, Building on top of other, like, so for instance, um, Many, many TV shows follow the same kind of pattern.

Girl meets boy, they get in a fight, they have some [00:16:00] entertaining interludes, And they get together in the end. That’s not to say that you can’t write another one of those. And that even generally I could write another one of those. And so I guess where the line is, is, is really going to be difficult, I think.

But yes, it’ll be interesting to follow it. And it’s going to be different in every country.

Marcus: So let me, let me, let me talk about where I see it valuable in healthcare.

Vic: Okay.

Marcus: So I think about a company like Civica, right? Which is that, that data consortium of all the different health systems that have decided to pool all of their data and then use it to support clinical trial.

Um, innovation, right? Um, that’s a lot of rich data and clear and clearly if they’ve got the rights to pull it into a consortium and then sell access to that data to different [00:17:00] pharmaceutical companies, they have the Other rights as well. We’re talking about organizations that will never be technology powerhouses, right?

But if they can participate in value creation in technology by way of data ownership, I think that’s really interesting. And that could be an interesting net new revenue stream for, you know, a segment of the industry, health systems in particular. Uh, they’re kind of struggling to find that new revenue streams.

So that’s interesting to me. I mean, you know, if you can actually turn your data into oil, like actually do it. And what makes it possible has always been what’s the application. And it’s been a long time since we’ve had an application as. Desired as Gen A. I. So there may be all of this, you know, all this loose change in a bunch of health systems pockets that they didn’t know they had.

But if they can get their data organized, get it cleaned up, and if they’ve actually got the rights to it, [00:18:00] um, it could be a plug in for them.

Vic: Yeah, I’m in favor of that. I’m worried that they will just like hold that golden data and not do much with it. And then it just delays everything like innovation doesn’t move forward because I don’t know greedy health systems are fighting with greedy tech companies and the patients lose.

Marcus: Yeah, well, I mean, I think that’s why I was pointing out civica, right? Because I think civica is kind of there. They’re trying to work. Yeah, exactly. Like, like, you know, they’ve been they’ve managed to get all of the different health systems to agree. To some level of data sharing and data integration really for the purpose of monetization.

I mean, you know, you could also say it’s for advancing health care and things like that, but they’re not going to do anything for free, right? You know what I mean? So I do think some of these initiatives are, are, are interesting, but this, this story is one we need to track because it [00:19:00] increases the value of data ownership.

And as we continue to think about ways that Gen AI is going to, and really not, not, not even just Gen AI. I mean, you know, all forms of machine learning. That are going to continue to emerge. So there’ll be something that’s going to come in the next two, three years. It’s going to blow what we currently understand about gen AI, gen AI out of the water and ownership of data seems to continue to, uh, sustain itself as a valuable beachhead for non technology organizations, um, to be able to have a viable position in this, in this future.

Yeah. So that’s, that’s good for me. I think that’s good.

Vic: Yeah. Especially if it’s Fairly unique or personalized or has some yes application that is not as general for sure

Marcus: All right. Let’s switch to a couple of stories around the private markets So first Goldman Sachs has raised 650 million for a life science fund This is good for the life sciences space.

That’s not a huge number, but Goldman Sachs [00:20:00] is a great name Uh, bringing capital back into that space smartly. They’re, they’re entering the space because they know that the, you know, company values are low, uh, two years of being capital starved has driven a lot of assets to bargain discounts. And, um, you know, I think.

It makes a lot of sense to allocate north of a half a billion to go get access to some of those assets.

Vic: Yeah, yeah, no question. I was happy to see, you know, a new fund being formed early in the year. It’s decent size. Maybe it could be bigger, but you know, 650 million is can do a lot with that in life sciences.

I think they’re going to be early mid mid, like pretty early, not as early as we are, but earlier. Um, so I mean, I think it’s a good, good sign that maybe. Um, the markets will begin to, I think in general, since the Fed has kind of pivoted, the markets are maybe a little bit choppy to start the year, but, but people are beginning to be more optimistic about [00:21:00] things.

Marcus: Yeah, yeah, and I think that the tide is turning as a lot of Weak hands have been flushed out and now, you know, the stronger performing companies are still there But the prices have come down to a much more attractive price point. Um, yeah, it’s great. It’s great So this this is good. This should be seen as good news uh I’ll be at jp morgan next week and it’ll be interesting to see kind of what the chatter is around life sciences and And the capital markets around life sciences.

There’s always a lot

Vic: of life sciences at jp

Marcus: morgan for sure for sure Uh, and then our second And Story about the private markets is, um, the, the story about LPs doubting venture funds startup valuation. So, it’s funny, uh, I, I had a conversation with an lp, not gonna say who. Yeah. But I had a conversation with an lp, it was actually my last LP meeting of the year.

And, um, we sort of went through, uh, went through the financials from, from Q3 and, you know, they, they asked about, you know, the write downs. Like, you know, kind, kind of kinda like, Hey, you know, where are the write downs? Yeah. , [00:22:00] you know what I mean? And I was like, well, you know, we, we, we had one in, in, in Q2, um, from an investment that we made, uh, sort of a down round, um, but that didn’t make it into the valuation meeting.

So it’ll be in the Q4 financials and it was like, okay, but. I didn’t reflect on until after the meeting that it was really the one thing they were prepared to talk about, you know, exactly. They had the financials out and they were ready to talk about the write downs. Right. And so I think it’s interesting that this story, uh, here on wall street journal pro venture capital top of the year, uh, is talking about LPs doubting venture fund startup valuations.

What’s really interesting about that is we’ve been covering on the show, uh, The whole back half of last year that we’ve been doing the show, both PitchBook and Carta significant decreases in the private markets already. Right. Um, anywhere from 25 percent in the, in the seed stage, all the way [00:23:00] to north of 60 percent declines in like the series D ranges.

Right. Um, and even with those markdowns, LPs are doubting startup valuations. So I think that’s interesting.

Vic: I think it’s a shift in the, in the balance of power, right? So for a long time, LPs were really trying to get access to the top quartile, top top VC funds. Mm-Hmm. . And they were not willing to be so, um, I’m gonna say aggressive, like really trying to push for.

much more clarity on the valuations. Uh, they, they accepted the fact that, um, they were in quotes, lucky to be in, and maybe there’s some inefficient pricing, but, but on the balance, it, it works out really well and you’re lucky to be in. And I think those days are over and it’s going to be. Uh, much more performance based, much [00:24:00] smaller funds, more transparency.

I think, um, the LPs have gained a lot of kind of clout and authority and status. And they’re looking at some of the big, big platforms. We’ve covered it last year with, with platforms kind of either shifting and selling pieces, getting smaller, shutting down, shut down altogether. Um, And so I think LPs have sort of gotten more, uh, ability to, to push for transparency and clarity and it’s probably healthy, honestly.

And if, if, you know, we are GPs, but I’ll, I’ll say I understand the, the incentives are for me to keep valuations high just to make it look good. But at the end of the day, I get judged on how much cash I send back to the LPs. Yeah. And so. If a GP is spending too much time worried about an interim evaluation, I think they’re probably not the best GP.

[00:25:00] Um, and I think GPs are going to have to be, and we already are, very transparent. Like, okay, here’s all, here’s how we came up with all the valuations. What part do you want to question? Let’s dig into it. That’s right. Um, maybe there’s a difference in opinion of some, some interpretation of something, but on balance, I think that’s a good thing for LPs to, to get more transparency, more clarity.

Marcus: Yeah. I mean, I was not guided by any LPs to do this, but. In, in my own, uh, reporting, I’ve really stopped emphasizing valuations. Um, and I’m not trying to hide anything from a valuation perspective. It’s just, I recognize in a market where everybody is down, it’s like, look. You know, you’re, you’re, you’re either, you’re either flat down or you had an up round via, you know, an actual financing round, which is, which is incredible if you, if you pulled that off.

Um, so I’m trying to be very straightforward around that stuff. What I am emphasizing is runway, right? [00:26:00] I’m emphasizing the vast majority of our portfolio has more than a year and a half of runway. Right. And to me, I think that’s a. That’s a big deal because, um, a lot of companies are not gonna make it.

Vic: Yeah.

Marcus: Because of runway issues. And, you know, the, the, the bad match of runway issues and capital scarcity, uh, they’re, they’re not gonna make it. And so the, the first thing you know, you can’t realize value if you don’t survive. Right. Long enough. Right. But, you know, you gotta kind of climb up the, the hierarchy of needs and

Yeah. You start with survival. Do you have the runway? So I’ve really focused on that and I got no problem reporting a, you know, a down value valuation. Uh, look, this increased scrutiny, I like it personally, um, because I’ve always sort of positioned myself to myself as like an underdog in this space. I mean, you know, don’t, I don’t have the, the pedigree,

Vic: neither one of us went to like a fancy MBA school.

We’re not on the coast. We don’t have big [00:27:00] institutional investors. Neither one of our daddies were, you know, also in the business and make introductions. So it’s good for us.

Marcus: Can’t play this anyway,

Vic: the transparency and level of play. If it’s good, that’s right. That’s right.

Marcus: So I kind of like that. Um, all right, let’s, let’s shift to a couple of stories around how the rest of the world can, can help America.

So still in the world of finance, this is a story in the wall street journal on January 1st. Uh, and I actually was really happy that you shared this story with me. So the headline is Japanese investors returned to overseas real estate with lessons learned from the 1990s. And. Basically, a bunch of Japanese investors have decided to come back to America and again, buy a bunch of discount assets.

And this time it’s commercial real estate, which is incredibly good because we’re wondering with all this refinancing, the loan to values fiasco that was looming, who’s going to buy this stuff? Who’s going to

Vic: step in and do it? Yeah. Who’s

Marcus: going to buy this stuff? You know, we covered Westgate mall in San Francisco.

They just left the keys. Right. So, so it’s like, who’s going to buy this stuff. And, and, uh, you [00:28:00] know, you found this article. And this chart that’s in the article, uh, of Japan’s commercial real estate investment in the Americas. Uh, the, the growth from 21 to 22 to 23. So, um, less than a billion dollars in investment in 20, in 2021, uh, north of $1.5 billion in 2022, north of $3.5 billion in 2023.

And we know that 3.5 billion in 2023 spent like 5 billion, right? , right? So they, they were buying great deals. And I think 2024 is going to have more great deals to offer them, quite frankly.

Vic: Yeah. So the reason I wanted to bring it up, I think it’s a good sign to start the year that the Japanese institutional investors are coming, looking for bargains, honestly, and, but willing to invest capital in the U S unlike the eighties.

I mean, part of the story, and you saw from the headline, they’re not buying like the name brand marquee. [00:29:00] They’re shopping for long term value, and that’s probably great, it’s more sustainable. My belief is that they’re, they’re maybe shifting a little bit away from China real estate. And towards American real estate, which also is great.

They don’t talk about that in the article, but it’s good for us. So I think you’re exactly right. We have lots of challenges in commercial real estate valuations and debt refinancing, but equity buyers. They will help the market clear and bring, bring clarity we get.

Marcus: Yeah. And, and, and it’s, it’s a, it’s a nice, it’s a nice backstop to our banks.

Yeah. You know, I mean, gosh, we, we need, you know, the, I mean the, the fed and look, we, we haven’t talked about it, but we probably should. I will not forget that we did an episode called the fed did what, uh, where we talked about, You know, the, the hikes and, and just like how much pain it was putting on us

Vic: and everyone.

Marcus: Yeah. And, uh, and [00:30:00] look, it’s, it’s January of 2024. And it does feel like Jay Powell and the FOMC has managed to guide us to, uh, And it’s like they held the rates sort of exactly at the right time, right? When everyone was just sort of feeling like it was too much, they, they stopped there and, uh, the inflation started to decline, uh, in the back half of the year, along with.

5 percent 6 percent GDP growth and uh, look, they kept the discount window open. Um, from the, from the moment the, the SVB thing went down, uh, and I know that it’s growing, but yeah, that BTFP.

Vic: Yeah. I mean, that was really important in March to keep the whole thing working. There would be so many banks under

Marcus: now if they didn’t put that program in place.

Vic: Yeah, and it’s still growing. There’s still little challenges in the bank system, but I think they have plenty of [00:31:00] capacity to keep that open for a long time.

Marcus: Yeah, so, gosh, I mean Yeah, so

Vic: I agree. Completely that the Fed has done a pretty good job reigning in inflation and then doing their best to sort of turn to sort of execute a soft landing.

I don’t know that I’m ready to say like they hit it, but we’ll see. I mean, the, uh, the next few months, it’s either going to like, you know, slow turn and we’ll be good off to the races. Yeah. You know, sometimes the landing, you might not be that soft. Yeah, sure. We’ll see.

Marcus: We’ll see how it

Vic: goes.

Marcus: Yeah. I mean, it’s, it’s premature to say they’ve hit it.

However, uh, the, the sky is not falling right now, you know, and the stock markets. Producing and companies are executing and capital feels like it’s starting to [00:32:00] flow again.

Vic: Yeah,

Marcus: right. It’s, it’s getting back to flowing. That’s

Vic: right. Yeah.

Marcus: Um, a bunch of assets have been repriced. They really needed to be repriced, especially given the run up that we had from all the wall street bets craziness.

And look, I mean, it feels like 2024 could be. An up year from 2023 could be an up year. And that’s all we can ask for. You know, can we can get a slightly better year than we had last year, especially in the private markets? Like that’d be great. Yeah. Great. Yeah. Um, okay. So one last door before we take a break.

Um, this is a story from free op, uh, which is a think tank, a friend of mine. Uh, who’s, who’s in the Aspen Institute health innovators fellowship with me over Roy, uh, who’s You know, Ovex been a speech writer and a strategist in the in the conservative space for for a long time and he started to think tank and they cover a lot of different things all around sort of, um, the importance of opportunity.

But health care is one of their big areas. Um, and they put out this this really cool sub stack. But [00:33:00] this Article that they put out called a fix for the coming physician shortage It caught my eye because it talks about policies that have happened in tennessee that I didn’t know about. Yeah, um either This is why you track these different think tanks because they’re tracking all this policy stuff that flies under the radar But apparently both tennessee and alabama two southeastern states that you would I think typically associate with being really hard on immigration Have actually passed laws that will expedite international medical graduates to enter the workforce, allowing them to practice without repeating residency if they meet certain criteria.

So basically saying we know we’re going to need more clinical workforce and we’re willing to take in more international clinicians. and expedite that process to meet that, to meet that need. So I, so I, I just found that to be really interesting. Not only that, uh, there’s policy happening, but that’s happening out of the Southeast United States.

You know, a lot of times if you’re just watching too much CNN and MSNBC and Fox, like you can’t even [00:34:00] imagine that this kind of policy can come out of the Southeast. So I thought it was, I thought it was really interesting.

Vic: Yeah. I think it’s a great, step is maybe more symbolic, I think, than it will really add a lot of physicians to Tennessee and Alabama.

But, but it’s great. And of course, I think if you have been trained as a, as a physician and you pass an entrance exam and you can treat Americans, we should have, anyone can come in. I think we need as many as we can get. I’d say the same with nurses. And lots of other, uh, parts of healthcare. But I think, um, it’s a good first step.

There’s a lot of places that I think we could bring in more and more people to really help in areas that we have shortages. And one of the things that makes me hopeful for America is our attractiveness to immigrants from around the world. Like, people want to come to the U. S. If we could just get [00:35:00] our act together, And produce a, a clear way for them to do that legally, but you know, my grandparents came over as immigrants.

And every, every immigrant then begins to sort of acculturize and become American. The great thing about our culture is it’s not just one thing. Right. And so we can absorb a decent number of immigrants every year. Right. Given our birth rate. We need that. And other, like Europe and Japan and other countries, they don’t have the same culture that can easily absorb significant percentages of foreigners like we do.

And that’s a huge advantage that Americans not really, we’re not really capturing today. We fight over immigration as a like political soundbite. And that, that’s not that useful. Like we have all these jobs, we need more people coming in. And I think every, Transcribed Immigrant [00:36:00] coming in legally and more avenues, more ways, more, more policies to bring them in is great.

Marcus: And it’s a unique advantage that we have, right? I mean, um, the, the reality is that the future is going to be even more tech enabled than it was today. That’s going to change the way that, that the clinical workforce actually looks right. I mean, they’re going to have to leverage more technology. And I think the things that humans are doing are going to start becoming more More technical in nature.

When I say technical, I mean the kinds of things that don’t necessarily require as much book knowledge, but could be more like a trade school form of knowledge, you know, um, like look, there’s not that big of a difference between, uh, sewing up a dress and sewing up skin there’s really not. I mean, you know, like it’s, it’s a, it’s a skill set, you know, and, and you know, can you, can you apply that, that skill, um, in the same, in a different theater.

Right. And so I think as we get [00:37:00] things more tech enabled, and we come to terms with the reality of the, the clinical shortage that we are facing, we’re going to have to be creative. That’s just the reality we’re going to have to be creative in terms of how we’re going to fill that, that gap. And I agree with you, America has a long, Legacy a long history of being immigration friendly and that has paid tremendous dividends to us economically And I think when you look at many other places in the world, especially in europe, you know, their political Uh environments are trending.

Otherwise, right? I mean they’re getting very anti immigration I would say here we’re not as much anti immigration as we are border protection You know if we’re getting specific about what our issues are here There’s a lot of issues around the border not so much around Immigration or lawful immigration, whereas in a lot of, you know, Europe, the it’s not border stuff.

It’s just literally fundamental immigration stuff and like national identity stuff. So yeah, I think

Vic: that’s the, I mean, [00:38:00] unfortunately. Both sides politically use border safety and immigration as like a wedge to get out their vote or, you know, demonize the other side. But I do think that it is legal immigration for jobs where we have shortages.

is very clear. We should, we should encourage it and allow it. And our system, our culture, the way we have our states and cities and just the identity of the U. S. is very open to, to immigrants, but it’s not even the immigrants coming. It’s really their kids and grandkids. They just are Americans. They don’t know any different.

And yet they bring all kinds of skills and perspectives and different views of the world that are really helpful. Yep. Yeah. Agree, agree.

Marcus: All right. So we’re going to stop. Let Doug share a little bit about Jumpstart Foundry. And, uh, we come back, we’re going to give a couple of notes about the healthcare, healthcare industry.

Doug Edwards: Thanks guys for [00:39:00] the opportunity to talk about our pre seed fund. Jumpstart Foundry. My name is Doug Edwards, CEO of Jumpstart Health Investors, the parent company of Jumpstart Foundry. We’re so excited to be able to talk about, uh, early stage venture investing, certainly the need for us to change the crazy world of healthcare in the United States.

We are spending 20 percent of our GDP north of 4 trillion a year on healthcare with suboptimal outcomes. Jumpstart Foundry exists to help us find and identify and invest in innovative companies that are going to make a difference in healthcare in our country. Every year, Jumpstart Foundry invests a fund, raises a fund, and deploys that across 30, 40, 50 assets every year, allowing ease of access for our limited partners.

to invest to help us make something better in health care. Some of the benefits of Jumpstart Foundry is there’s no management fees. We deploy all the capital that’s raised every year in the fund. We find the best and [00:40:00] brightest typically around single digit percentage of companies that apply for funding from Jumpstart.

And we invest in the most incredible, robust. Innovative solutions and founders in the United States. Over the last nine years, Jumpstart Foundry has invested in nearly 200 early stage, pre seed stage companies in the country. Through those most innovative solutions that Jumpstart Foundry invests in, we also provide great returns and a great experience for our limited partners.

We partner with AngelList to administer the fund, making that ease of access, not only with low minimums, but the ease of investing in venture much better. We all know that healthcare is broken. Everyone deserves better. Come alongside us with Jumpstart Foundry, invest in making the future of healthcare better and make something better in healthcare.

Thank you guys. Now back to the show.

Marcus: All right. So, uh, jumping back into healthcare world, Elevance Health has acquired Paragon Healthcare. And, uh, this is a story about an [00:41:00] infusion services company. So we’ve been talking a lot about specialty pharmacy and infusion services. And this is Elevance continuing to build out their stack and making their play in the space.

Vic: Yeah, I mean, they continue to sort of expand and build out their payvider. Playbook, um, and they’re, they’re adding to it. I think infusion therapy is a really good place to, it’s high growth. We talked about it, I don’t know, two or three shows ago. It’s lots of new things that you need to do, especially drugs and things that way.

And them owning it is going to be, um. Really beneficial to their network, and I expect other payers are going to try to figure out something.

Marcus: Yeah, look, starting off the year, July, uh, January 4th, with, with a payvider acquisition, uh, I think we predicted there will be more and more payvider acquisitions happening this year, so right away.

In the first week, uh, that prediction coming true. And I think we’ll just see more of this. Yeah. Um, this is [00:42:00] to me, I think is probably the, the biggest, uh, incredible healthcare story. So, uh, Lily launches end to end digital healthcare experience through Lily direct. So we had to read the entire press release to really get the gravity of what’s going on here three times.

Yeah. Um, basically. Lily is going direct to consumer. They are creating a digital platform. That digital platform will engage patients in the United States who live with obesity, migraines, and diabetes, obviously all strong areas for Lily, where they’ve got a great portfolio of solutions, pharmacological solutions, and it is going to offer them, um, I’m assuming pricing as well as affordable ways to purchase those.

Those, uh, those prescriptions direct along with, uh, an [00:43:00] independent, they say multiple times through here, uh, an independent group of providers, telehealth providers, and an independent search tool that will allow you to find a healthcare professional that is in person that’s, that’s in your area. So independent to me, I think is signal for not in network, not part of a pre bundled insurance.

Product at all. Um, this appears to be a full on direct to consumer platform, and they’re not even like playing around. It’s branded Lilly. Lilly Direct. They’re using their brand. Uh, so this is a true consumer effort from Lilly, from a, from a pharma

Vic: company. Yeah, and they’re calling it independent provider, but I think the providers work for Lily.

Maybe they’re subcontracted out, but you go to Lily Direct and you say, have, I need help with my diabetes, and they [00:44:00] introduce you to a provider on telemedicine that you can talk to. I think what they mean independent is they’ve been referred to by Lily, but they’re not forced to, to prescribe only Lily drugs.

They can get, I read it as they can do any drugs. But Lily wants to own that relationship. And then they have their whole suite of drugs, which are very effective.

Marcus: Yeah. I mean, I think because I don’t understand the, the actual, um, news

Vic: only been out for a few hours, so we’ll learn more.

Marcus: Yeah. And, and I, I am not a policy expert, so I don’t understand sort of the regulatory issues here.

Obviously they have fine tooth comb them or they wouldn’t have even launched this thing. But I think the reason why they’re saying independent is because this is more of a Packaging, uh, of, of everything that the patient needs as opposed to an owned relationship. Right? So I think they’re saying we’re through this digital platform.

We’re [00:45:00] packaging access to independent telehealth providers to me that those words feel very, very intentional, right? Access to independent telehealth providers, right? Which is probably absolutely okay for them to do because you just package it in an app and it just directs you to a telehealth provider, right?

I mean, that’s, that’s a, there’s actually not a requirement for there to be any official relationship there at all, right? And then they also say an independent search tool that allows a patient to find healthcare professionals. So again, like, yeah, to go, to go in person, right? You don’t have to have any relationship with those healthcare professionals, but they probably have access to a directory and they’ve created a search tool that makes it very sort of easy For that patient to be able to do that.

I think a lot of this is, is centered around the fact that if you are a patient and you’re living with obesity or living with migraines, or you’re living with that with, um, diabetes in all three of those cases, it’s likely you need certain [00:46:00] prescriptions. Yeah. And Lily has products and Lily has products in that portfolio.

And they’re just saying, listen, why? You know, why would we not, amongst all the other ways that we go to market, create a, create a direct to consumer channel. And I think some of this has to do with the fact that we have the Mark Cuban cost pluses of the world, right? And we have Amazon getting into this, into this space directly, right?

It, it, it seems to me that we’re going to have more consumer facing, savvy, um, you know, interfaces. For patients to get access to the meds that they need. And Lily seems to be a pharmaceutical company that realizes that and says. We got to get in the game, you know, we got to get, we got to get in the game and at least learn by doing, you know,

Vic: there’s no question that, uh, it’s on the same trend as empowering the consumer, but I think it’s also a kind of a response to the payvider move.

Yeah, I think that makes [00:47:00] sense. They are. beginning to test the waters of providing care of themselves. Now, there’s some complexity. We need to talk to Emily or another policy person, but I think they have to keep like a little bit of separation independent. You can’t be forced to only prescribe lowly drugs.

Marcus: That’s why I’m saying the access and the independent piece, I think are critical. And I would imagine that’s the It’s not just press release. I would imagine that it

Vic: actually will have like

Marcus: there’s arms length between their them and the provider. And I

Vic: expect, I mean, I think they probably. I feel like their drug solutions, their drug treatments are very good solutions for some situations, maybe not for all, and so the docs should preside wherever is needed.

What also is kind of interesting is there’s this, um, I don’t know, it’s a trajectory I guess of, it used to be that, um, the pharmaceutical sales reps went around and they sort of like catered to the docs, tried to educate them. [00:48:00] It got to be like a lot of GIFs and not great things going on. And then that got sort of squashed.

But sort of simultaneously, I don’t know if it was related or not, but they started doing lots of TV ads. Which are super annoying for me, because I don’t want to watch the TV ads particularly. But they spent a lot of money on TV ads. And this feels like the next extension, right? They’re just sort of, they’re cutting the doc.

Out altogether, or there’ll be a doc, but it’s not like they’re not relying

Marcus: on to me. It’s more to me. It’s more. They’re cutting the insurance company out. That’s that’s what I think about more here is, and that’s who they’re competing against. I mean, we just had a story about elevance. That’s that’s what I mean, right?

That’s what I mean. And that’s what I think your point about the pay writers is, is it’s a response to that? Because so just to read this sentence here, uh, In the press release by obtaining medicines directly from Lily, patients can easily access [00:49:00] Lily’s affordability solutions and saving card opportunities are automatically applied for patients who qualify so affordability solutions, right?

That’s a. That’s saying we’re going to make a suite of affordability solutions that are going to be direct between us as the pharmaceutical company and the consumer. That’s, that’s wiping out PBM, that’s wiping out insurance company, that’s wiping out pharmacy, right? I mean Well,

Vic: it might be, it might

Marcus: not be.

I mean, you can Not when I say wiping out. I don’t mean wiping out. I mean, in this lily direct product, you don’t, you know, the patient through those things. That’s what I mean. You don’t have to go through those things through this vehicle.

Vic: That’s right. I think that over time, it’s likely that. Lily, and Nova Nordus, and Johnson Johnson, and probably someone I, um, can’t think of right now, will begin to sort of build out their full stack of services.

[00:50:00] Eventually, they’ll have, likely, an underwriting model, um, and I think the, the payviders have already talked a lot, are going the other, the other way. The, um, the group that’s not really present is the actual providers themselves. They haven’t really expanded much yet. Maybe this year, people will. So that, that was the really, um, this was the shocking story this week to me.

In a good way. I mean, it’s a positive story.

Marcus: And let me tell you the other thing that I think is really interesting about this is it is It’s Lily moving into disease specific digital health, right? Which, which I think for us as venture capitalists, um, that is certainly an area of, of the healthcare venture capital ecosystem.

And it’s one that we’ve talked about several times on this show. It’s actually a space I really like. Yeah. Um, I like disease specific digital health, right? Because

Vic: And that’s [00:51:00] where I like to take on risk, too. Like, cause you, you can measure it, you can really influence it, you can make money there.

Marcus: Yeah.

And

Vic: help

Marcus: the patients. So, so, there’s sort of two things about this. One, it’s tremendous validation, I think, that venture capitalists who are focused on this disease specific digital health angle, Are headed in the right direction, right? That’s that’s kind of where the industry is going. So that makes sense.

Yes. Thumbs up. That’s good. But also you now have to consider that you may be in competition with a juggernaut like Lily. Because, you know, make no mistake. I mean, this is one of the best performing companies in America of 2023, right? So, um, it’s, it’s. It’s great in the sense that it presents some great validation for the business model.

Yeah, and it’s competitive. And it’s competitive, yeah. Yeah, and it’s competitive. Um, so really interesting.

Vic: Yeah, I think it’s great. I mean, I mean, I say to entrepreneurs, I think you say something similar. There’s no competition in the space. There’s probably a [00:52:00] reason. Yeah, I like it. I think it’s, it’s great that Louie’s entering.

And our companies still be nimble and can move quickly. And then literally probably acquire some of them. Yeah.

Marcus: And also I would say migraine isn’t an area I think we would focus on anyway, but obesity and diabetes, we’ve looked at those and kind of felt like, yeah, not only are they big, but they’re also, there’s like lots of people going after them.

We, I think we’ve kind of said. Maybe a little bit picked over right now. Not too picked over for a lily. I mean, obviously, they’ve got a portfolio of drugs for those people, right? But, but, um, you know, if you’re just a pure digital health provider, kind of, you know, I hate to say it, but kind of a middleman in the space, there’s a lot of competition in that market.

So not not one we would really go after. All right. The final thing, which is definitely a feel good story that you found in the Wall Street Journal of all places. Yeah. Uh, the story of Gladys McGarry. Yeah, 103. The headline is how to work and [00:53:00] love it into your 80s and beyond. We lost a bunch of icons, uh, towards the end of the year.

We lost Charlie Munger, um, we lost, uh, Henry Kissinger, um, and, um,

Vic: Carter, what’s, what’s, uh, Rosalind Carter. Yeah, yeah.

Marcus: Um, so, and all of them were in their late 90s, right? Uh, you know, Munger was 99. Um, but this is a great story about Glass McGarry who is 103, uh, who’s a doctor, um, and is still active.

Vic: Yeah, yeah, she’s still writing books and speaking and, um, does rounding and stuff.

The story that I like, the piece of it, it’s a long story. People should read it just for the feel good. Um, whenever I’m tired and feel like it’s a long day. It’s You know, Gladys is 103 and she’s still there working.

Marcus: Yeah. They got pictures of her in her bike. Yeah. She’s on, on

Vic: a zoom

Marcus: call with her family on a zoom call.

She’s she’s signing a book. Presumably she wrote the book. She’s signing a book. I mean, it’s, it’s, uh, it’s, it’s amazing. And, and also I gotta say she looks great.

Vic: [00:54:00] Yeah. Yeah. And so, uh, it’s a great story. And also, she is a clinician, sort of primary care, um, and she had an event, the best part of the story I thought was, her husband left her for another woman in the clinic, they worked together in the clinic, ended up having an affair with a nurse, which I’ve never heard that story before.

Laughter. And she was upset for an hour or so, and then she, like, picked herself up and started her own competing clinic down the street. One of her patients, uh, co signed a loan to help her get started. And that was 50 years ago. She was 65

Marcus: or something. Amazing.

Vic: So, I mean, 65 and starting a new career, a new life.

Divorced except now she’s 103. So 60 that was a long time ago. Anyway, so when I’m complaining about my aches and pains and work have to do, I’m thinking Gladys.

Marcus: Yeah. And [00:55:00] I think that, you know, the theme of, of, uh, of the, of the article, which is, You know, helpful for us. This is a work podcast, right? I mean, you know, you and I will The listeners don’t really know what time of day we we record this But we finish a day of work on a thursday and then we sit here We try to go over everything and we start recording at you know, five or six today late, you know after 6 p.

m um and look It’s, it’s, it’s late. It’s work, but we love what we do. Um, you know, and I, I could only hope to live 203, but I don’t necessarily, uh, I don’t desire an end to come to the work that I’m doing, you know, I mean, I love the work that we get to do working in healthcare innovation. Working with founders, working with healthcare organizations, helping patients, um, and I think specifically for her, or, or even, even for Munger, or Sandra Day O’Connor, I mean, you know, you think [00:56:00] about these, these, these, these icons, and how long they lived, and how much their, their lifelong work ethic was tied to their long life, right?

Yeah. And, I don’t know. It gives me a lot of hope because you spend a lot of your living days. You’re waking time working, and it’s it’s nice to know that it’s not necessary that work isn’t necessarily something that is robbing you of life as so many people try to frame it as, but it could be the thing that is sustaining and extending your life.

Vic: Yeah, I think I think that’s right. I mean, I like the work that we do. I would do it, you know, even if I didn’t get paid for it, I’d have to figure out some way to make money. Right. But, I mean, I have two boys, we both have two boys, they’re in college and high school and I’m trying to get them to just follow what they really are passionate about, what they like, and then they’ll figure out a way to make money, because you’ll end up being curious and looking into it and, [00:57:00] Kind of digging into it and then you spend a lot of hours, but it’s not so torturous.

Um, I think that has worked well for me and I think it worked well for glass for sure. For

Marcus: sure. So we’ll, this, uh, this link will be in the show notes. This is a feel good story. I think we’re going to try to include more feel good stories in 2024. That’s a resolution for ours for, for, for our little podcast here.

So, um, do read this. It’s a, it’s a, it’s a great story. And look, we hope that you all had. You got some rest, uh, 2024 huge year. Obviously a lot of people are kind of antsy election year, weird stuff with all this AI stuff. Um, but a lot of things to be excited about and, um, a lot of great things happening in the, in the, in the world of healthcare, innovation, venture capital.

So I hope that you will stick with us all year. We’re going to keep popping out these shows and, um. Exciting to say that we already have four guests scheduled for the start of the year. So I’ll be at JP Morgan. If you happen to be at JP Morgan, um, hit me [00:58:00] up. Uh, we’d love to see you while I’m out there, but, um, you know, we, we’ve already, we’re planning on doing a lot of guest episodes, not in place of these weekly roundup shows that we do, but in addition to, so.

You’ll start to see two shows a week, many weeks of the year. Um, and we’re just excited that you’re here

Vic: with us. Domain experts, you know, help us think about different issues.

Marcus: Yeah. Cause you and I are certainly not domain experts.

Vic: Uh,

Marcus: anyway, well, Vic, thanks for, um, you know, putting together another great show and, uh, 35 down.

Yeah. Have fun at JPM. Thanks, man.